It takes more than home improvement know-how to make money with
rehab properties. In order to be a successful investor, you need to know
what needs to be repaired, how to do it cost effectively and according to the applicable building code.
Interestingly enough, even experienced investors often underestimate repair costs, and because of this, some of the potential profit gets eaten .. =o(
Remember, you make your money on a deal when you buy, not when you sell.
Before you sign on the line, do a thorough accessment of the homes needs on an excel spreedsheet. Assign cost/repair estimates to the items. If you do not know what you are doing...GET HELP!!! Take your list to Home Depot or
Lowe’s and total the bill.
Labor costs are somewhere between $0.50 and $1.00
of installation cost per dollar spent on materials – and then add 10 to
20% percent to the total. The Murphy Factor (extra 10 to 20%)will help sofen the blow if you underestimate
the costs. This will ensure you make an offer that allows you to turn a decent profit. For older houses, built in the 70's/60's, etc., that are sight unseen, or you can not get inside of before hand, add as much as 30% to 50% to the
total, for the repair estimate to mainain a profit safety cushion.WHEN I DOUBT< GET HELP OR OVER-ESTIMATE REPAIR QUOTES!! ROUND UP!
Thou shalt not over spend!!
Many new investors have the urge to fix and upgrade everything!! WRONG!!
The amount of upgrades and expendatures depends on the home’s neighborhood.
The goal as a investor should be to
upgrade the condition of your property so that it fits in with other
homes in the neighborhood. You don’t usually want the nicest house on
the block – just the cleanest! For example, if every house in a
half-mile radius has an air conditioning unit hanging out of a window,
then it would be foolish to install central air. Regardless of the
neighborhood’s affluence, the following upgrades rarely pay for
themselves: New windows, sprinklers, security systems, and storm doors.
In general, your goal with any repair should
be for it to add double its cost to the home’s value. Installing a
ceiling fan, for example, adds to a property’s desirability factor well
beyond its purchase price and cost to install. Switching old door knobs,
switch plates, toilet seats and trim can also do wonders for a home’s
selling price. Visual sights sell homes!! (Try saying that three times!)
Finally, the least expensive thing you can
do to increase a home’s value is some simple yard work. Even modest
landscaping can greatly increase the curb appeal of your property, which
is generously reflected in a retail buyer’s perception of value.
A little paint goes a long way!
Be well, good luck, good flipping!!Vincent Warren Paige, Jr.
REALTOR® | RE/MAX Showcase
Certified Broker Price Opinion Registered Agent (BPOR)
8934 Conroy Windermere Road | Orlando, FL 32835
Direct: 407.256.8190 | Fax: 407.264.8073